2.24.2010

Burlington Telecom: There are no heroes in this story

Where is my John Wayne?
Where is my prairie son?
Where is my happy ending?
Where have all the cowboys gone?

-- Where have all the cowboys gone?, Paula Cole

American mythology is full of stories of lone heroes who ride into town to save the day (see Eastwood, Clint for example). The ongoing saga of Burlington Telecom, however, is a story without a happy ending, and unfortunately no band of heroes is going to appear and save the day.

Burlington Telecom is now technically in default and can't pay its debt service (details here). Something has got to give at some point, BT has been constrained from access to additional public monies, and given that it needs cash, options are limited.

Bankruptcy looms, and the role of the City of Burlington as a guarantor of BT's debt will keep lawyers lawyering (and billing) for a good long time. Also, there is a criminal investigation into how city employees used public monies to finance BT and where the monies went. BT threatens to become the fiber optic network that ate Burlington, or at least destroys the city's credit rating.

Into this morass, a group of experts has come forward and offered to save the day. As reported in the news site VTdigger.org (full story here):

A group of telecommunication professionals have offered to bail out Burlington Telecom in exchange for management control of the nonprofit utility. The “team” of nine men, who represent tech, legal and energy firms, sent a detailed proposal to the City of Burlington on Feb. 17. The three-point plan would provide a “safety net” for Burlington Telecom in the event that the city is unable to shore up the utility on its own.

....

Under the proposal, as outlined by Andy Montroll, former president of the Burlington City Council, the city would cede management and control of Burlington Telecom to the nine-person team, which would be responsible for stabilizing the operation and for preventing “further immediate erosion and lay the ground work for a sustained recovery.” The team includes Tim Nulty, the former general manager of Burlington Telecom and the director of ECFiber....

And, in Seven Days, this nugget from the aforementioned Mr. Nulty:

“I have a great deal of blood, sweat and tears in BT, and I hate to see it trashed and destroyed by incompetence and misbehavior” ... “It's also damaging the reputation of other municipal fiber networks around the country.”

Now, for the sake of simplicity, and because I have better things to do than to write thousands of words on this tired situation -- though I think that it would be quite easy, to get an entire Master's thesis-length document, out of the genesis, life and slow death of Burlington Telecom, I will try and get the heart of the matter. There are two ways of looking at the situation:

1) Burlington Telecom was a good idea and its present failure is the result of the incompetence, malfeasance, and machinations of the current regime in Burlington City Hall and the existing BT management team. This cast of characters is a group that could be fairly characterized as 'the gang that couldn't shoot straight.'

So, has BT been 'trashed' by incompetence and misbehavior'?

or, scenario #2

2) Burlington Telecom was doomed right from the start, it was a fundamentally flawed concept that would never work financially, regardless of the competence (or lack thereof) of local management and municipal government.

Myself, I lean towards #2: Burlington Telecom was doomed when the ill-informed citizens of Burlington voted to approve the idea. While it is technically feasible to build a fiber-to-the-home network in Burlington, it has proven to be very expensive (and the need for more capital basically never ends) and the financial business case for the project never made sense. The numbers didn't add up then, they don't add up now, and it's hard to imagine that this can be resolved.

Let me be clear: I think that the current management team at Burlington Telecom is incompetent and has not faced reality -- the current General Manager has made some absolutely jaw-dropping public statements, considering the fact that he is running a bankrupt company. Similarly, Mayor Bob Kiss seems to live in denial about the reality of the situation.

I hope that a well-informed, engaged and highly motivated electorate turns out on election day in large numbers and turns out the current mayor and his allies on the city council -- I even can indulge in Utopian fantasies on occasion.

But, as noted above, I don't think that Burlington Telecom's problems began with the Kiss administration -- the problems started in the late 1990's when the idea was originally conceived. And, frankly, as Mr. Nulty is one of the enthusiasts originally behind this scheme, I would view this offer of a rescue with considerable doubt and suspicion.

BT is a story without heroes or redemption and will probably end with the network being sold off for pennies on the dollar. Was this a good use of scarce municipal resources? I think not.

I know that this blog post misses a lot of nuance -- there are a lot of issues that could be addressed. I have also noticed that the while the media is adequate at covering what's happening -- there is not much analysis as to why things are happening. But I'm also tired of reading about the situation and am ready to move on.

Perhaps I'll write some amateur analysis on the Vermont Public Service board's activities (BT, Fairpoint, Entergy, etc.), who knew that these topics could be so lively and engaging.

This recent post contains links to all posts I have written on BT so far.

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